By Juan M. Villaverde | February 12, 2018
Just this past Friday, we released some important ratings changes on major cryptocurrencies. If you’re a subscriber, check your inbox for the issue we sent you Friday afternoon. If not, you can join here.
Now, for today’s topic: Tether.
This is a cryptocurrency that’s supposed to be backed by the U.S. dollar in a one-to-one ratio. In other words, the idea is that there’s only one dollar of USDT (Tether) for every dollar they have in deposits.
Why is it important? Because a lot of exchanges rely on Tether for their markets. “Crypto only” exchanges like Binance or OKex (which dominate crypto trading) do not accept fiat. So they use Tether as an equivalent to the USD.
Just to give you an idea of how important the stability of Tether is for crypto trading today, let me cite this stunning factoid:
Tether is the third-largest cryptocurrency by trading volume, behind Bitcoin and Ethereum, which are also used as liquidity. Thus, most exchange pairs are against Bitcoin, Ethereum or Tether.
The big issue: There’s never been an audit, and the folks behind Tether has been quite shady when asked. They have continuously claimed their tokens are backed 100% by actual dollars, yet they have failed to present any evidence to support this claim.
On social media, there appears to be consensus that what Tether is actually doing is running a fractional reserve system.
In other words, most observers claim they DO NOT have the dollars to back up all those Tether coins.
I tend to agree. It’s just too suspicious, and I encourage you to check out this Twitter handle if you want to learn more about the suspicious activity related to Tether and its “sponsor” Bitfinex, one of the largest crypto exchanges.
Some other critical facts:
Fact #1. Tether is the only “cryptocurrency” with trading volume that regularly exceeds that of its market cap.
Fact #2. This means the entire Tether supply changes hands regularly,